Former Groupon employees countersue over contract terms

(Crain's) — Three former Groupon Inc. sales representatives who were sued last year after they went to work for Google Inc. are fighting back.

In a countersuit in Cook County Circuit Court, former Groupon employees Brian Hanna, Michael Nolan and Nikki Dorough say Groupon's lawsuit “is a sham,” intended to bully employees and keep them from joining competitors. It's also a ruse to obtain information about how Google is attacking the daily-deal business, they say.

“These are young people doing nothing more than seeking to advance their careers,” said Steven Molo, a New York-based attorney at Molo Lamken LLP who represents the defendants. “They're not doing it at Groupon's expense. Groupon has overreached.”

The countersuit, filed Wednesday, reveals an increasingly testy relationship between two high-profile Internet players: Google, the king of search advertising, based in Mountain View, Calif., and Chicago-based Groupon, the leader in the new online-advertising business with daily deals. Since Groupon spurned a buyout by Google in late 2010, Google launched its own daily-deal business. They have traded employees and lawsuits.

According to the filing, Groupon has subpoenaed Google, demanding confidential info on Google Offers, its daily-deal service, such as pricing and incentives. The suit further claims that Groupon's lawsuit is a “means to rifle through its newest competitor's pockets.”

Both Groupon and Google, which isn't named specifically as a defendant in the suit, declined to comment.

Messrs. Hanna and Nolan and Ms. Dorough say Groupon's noncompete agreement, which prevents employees from working for any kind of coupon or discount company for two years, is too broad and that they never had access to any proprietary information or trade secrets, as Groupon alleged in its suit filed in October.

They are now seeking compensatory damages, claiming the Groupon suit interferes with their valid employment at Google, and at least $50,000 each in punitive damages, as well as attorney's fees.

The three contend that Groupon used the lawsuits to stem departures ahead of its IPO last fall when morale was slumping because sales commissions had been sharply reduced. Ms. Dorough, a 26-year-old sales rep, saw her commissions cut to 2.6% from 6.2% of the revenue generated for Groupon by each deal in February.

“Declining financial opportunities at Groupon were accompanied by a rapidly deteriorating work environment,” the suit said. “As employees were pressured to reach largely unrealistic sales quotas, they were also yelled at or otherwise reprimanded for socializing or laughing while at work.”

The suit calls out Groupon for hypocrisy, saying that its view of “the labor market is a one-way street.” It notes that Groupon sued former employees but recently “has approached multiple current employees, bragging that ‘it is building a small team of stars inside Groupon, including several recent Googlers.' ”